2. The impact of a tariff Consider a hypothetical example of trade in steel between the United States and China. For simplicity, assume that China is the only source of U.S. steel imports. The following graph shows the U.S. market for steel. Note that in the absence of any trade, the market price for steel in the United States is $500 per tonne, and the equilibrium quantity is 250 million tonnes per month. Use the green area (triangle symbol) to show U.S. consumer surplus under free trade with China, and use the purple area (diamond symbol) to show U.S. producer surplus under free trade with China PRICE (Dollars per tonne) 1000 Qomestic Demand Domestic Supply 900 Consumer Surplus 800 700 800 100 400 300 200 100 9 Free Trade Price 100 150 200 250 300 350 400 450 500 QUANTITY OF STEEL (Millions of tonnes per month) Producer Surplus